Thursday, 19 July 2012

How can we influence the public policy debate? Pt I - Death and taxes

My public policy seminar binge continued with two seminars this week, both of which raised interesting questions about how to influence public policy.

Is it possible to get good outcomes in the new world order?

How to influence public policy - how to get an issue on the agenda, get a particular proposal implemented, or shape the development of someone else's proposals - are important issues for Catholics to think about, since in this country as well as many others, we are losing badly in the public square at the moment.

If it's any consolation, so is the public policy 'establishment', such as it is, for both seminars were in fact rather counsels of despair from former politicians, public servants and current academics.

The fundamental issue identified in both of them was the way policy development paradigms are being impacted by the new media.  As Lenore Taylor of the Sydney Morning Herald on yesterday's panel pointed out, a decade or two back, if you managed to get key opinion leaders in the media on side, the rest of the journalistic flock would largely follow.  That centre of gravity has gone, and journalism has collapsed to much narrower narrative around the political contest, challenged from the sidelines by bloggers and others. 

This post focuses primarily on Monday's ANU Crawford School of Public Policy seminar on tax reform.  In the next post I'll talk more about yesterday's seminar on the role of academics in influencing public policy.

Is (real tax) reform possible?

At Monday's seminar, on the Henry Tax Review, there was a lot of discussion about whether or not the Mining Tax as it was finally implemented had ultimately been worth the effort - would it actually raise any revenue, and would it be more economically distorting than the existing taxes it was originally intended to replace? 

A group of economists who originally lent public support to the idea of a mining resource rent tax back in 2010 were polled recently by The Economist, and on balance most of them thought it probably was (despite the mess the Government made of it). 

Monday's group, which included some big names (Chaired by Bob Gregory of ANU; Ken Henry (former Secretary of the Treasury, now Executive Chair of the new Institute of Public Policy); John Freebairn (University of Melbourne); Patricia Apps (University of Sydney); John Hewson (former leader of the Opposition), and James Merlees (UK, Nobel Laureate) seemed rather less convinced!

But there was quite an interesting discussion on things that could and should have been done to better manage processes such as the mining and carbon taxes, such as quarantining the revenue from the mining tax and devote it to infrastructure and having the Competition Commission put out a price list of increases from the carbon tax and have the Competition Commission jump on anyone who attempts to hike up their prices above that (as happened under Professor Fels when the GST was introduced in Australia).

Death and taxes?

The real frustration at the tax seminar though, was how to sell the need for tax increases.

Tax reform, in the popular mind, it was argued, equates to tax cuts.

Now personally, I have to say, that I think it is a bit rich for a bunch of economists to blame this on the media or anyone else, because this perception is largely the fault of economists.  You only have to think back twenty years or so to the era of economic rationalism and microeconomic reform - back then economists were arguing long and loudly to cut taxes in order to make Australia a more internationally competitive economy.

But claims of the mining industry aside, economists no longer seem to believe the rhetoric about tax rates and international competitiveness as strongly.  More fundamentally, Australia needs to find ways of  increasing its revenue base in order to cope with the costs of our ageing population, and the infrastructure needs created by our rapidly growing population.

Now increasing Government revenue is obviously not the only possible solution to the first problem at least: other approaches could include measures to promote tighter family ties and mutual support and greater emphasis on self-provision (for example by making people sell the family home to pay for their nursing home care, a proposal the Howard Government backed away from) and more. 

But there is a hard reality that has to be faced, and we need to be thinking about it because, as we all know, some are already working hard to promote a very simple solution to the costs of an ageing population.  It is called euthanasia.

Instead of providing appropriate care for the elderly in hospital, for example, the latest edition of the British Medical Journal carries an editorial protesting a court decision to prevent doctors dehydrating patients to death as they wish.

Similarly, the push to reduce the 'costs' of disability by the simple expedient of aborting any babies identified as having downs syndrome or other disabilities identifiable in the womb is building momentum.

Accordingly, getting genuine tax reform back on the agenda should be a key issue Catholics should be concerned about.

Other mechanisms?

The seminar touched on several other issues that we should want to see on the agenda too: how to make the system more progressive/reduce inequality in Australia, for example through a wealth and/or land tax; and how to get rid of the 'bad taxes' that distort decision-making and undermine productivity.

And there was an entertaining discussion on how best to go about reform: do you, for example, have a Henry Review-type exercize and layout a possible long-term agenda - only to see most of it quickly rejected by both sides of politics!? 

Or to you try to do things as much as possible by stealth, taking small incremental steps that ultimately completely transform the system (as Patricia Apps argued, correctly in my view though she was rather shouted down by other members of the panel, happened under the Howard Government)? 

Is there a way of setting up an institutional arrangement at arms-length from Government to do the job?  It might sound implausible that politicians will ever vacate the field, but John Hewson provided a useful reminder that once upon a time Australia's exchange and interest rates were set by a bunch of politicians with vested interests sitting around the Cabinet table...

All approaches worth pondering further how they could be made to work. 

But in the end, I suspect that none of this thinking is really radical enough to deal with the challenge presented by the changed paradigm presented by the invasion of ipads and applications.

And at both seminars there seemed to be, in my opinion, a certain failure to understand some basic psychological realities about change, most clearly manifested perhaps in Ken Henry's widely reported comments about the evil of overcompensating, or 'bribing' the losers of reforms.  But I'll come back to that in the next post on this subject...

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